NBC Vows to Make Olympics Advertisers Whole Amid Lower Ratingsby
Network set aside enough ad inventory for ‘make goods’: exec
NBC sold $30 million more in Olympics ads since games started
NBC said it will make good on its audience guarantees to Olympics advertisers, offering them free extra commercial time during the games to make up for U.S. TV ratings that have fallen short of viewership four years ago.
“We build in inventory to make sure we deliver what we promised them,” Mark Lazarus, chairman of NBC Sports Group, said in a call with reporters. “We will leave the Olympic games with every advertiser getting exactly what we agreed upon with them.”
When TV networks like Comcast Corp.-owned NBC sell commercials, they guarantee advertisers will reach a certain number of viewers. For the Rio Olympics, NBC promised an average prime-time rating on its broadcast network of 18, according to one ad buyer who asked not to be identified discussing private information. NBC’s broadcast network is averaging a 15.6 prime-time rating, Lazarus said Thursday.
Each rating point equals 1 percent of the 116.4 million U.S. TV households tracked by Nielsen, meaning NBC is roughly averaging 18.2 million households versus a guarantee of about 21 million. NBC said it doesn’t provide specifics on its guarantees.
It had been a tough week for NBC. The network’s Friday broadcast of the opening ceremony attracted 35 percent fewer U.S. viewers than the same event in London four years ago. While viewership has improved, the NBC broadcast network’s TV ratings were down 27 percent in prime time compared with the London games in 2012, according to Bloomberg Intelligence data as of Tuesday.
If NBC’s Olympics audience falls short of its guarantee, the network will have to give away commercial time to appease advertisers, which the industry calls “make goods.” That’s extra commercial time that NBC could otherwise be selling, meaning it misses a revenue opportunity. NBC could be forced to offer advertisers free commercial time on fall programming like Sunday Night Football if doesn’t have enough Olympics commercials time set aside, RBC Capital Markets media analyst Steven Cahall wrote in a note Thursday.
But NBC is so confident it set aside enough extra time for make goods that it sold an additional $30 million in advertising since the games started, adding to the $1.2 billion in national commercial time that the network sold before the games, Lazarus said.
While the prime-time audience on NBC’s broadcast network is down from 2012, Lazarus said the decline is smaller after counting viewers who tune in on its cable networks or online, reflecting the changing ways that people are consuming television. NBC, for instance, surpassed 1 billion streaming minutes -- an Olympics record, Lazarus said.
“Overall our ratings consumption is meeting our expectations,” Lazarus said. “The mix is just a little different. Cable and digital are continuing to grow at a fast rate.”
Lazarus noted that NBC has TV and digital rights to the Olympics until 2032 and “we can alter our plans from games to games as technology and behaviors continue to change.”
He added that NBC is “crossing a bridge of how to measure all this.”
About 31.5 million people tuned in on TV and online to watch the Olympics Monday night, about the same number as those who watched only on TV four years ago, the network said Tuesday in a statement.
Lazarus said NBC guaranteed audiences on three platforms: its broadcast network, its cable networks and its digital channels. “While broadcast is down, cable and streaming are up. It all comes together and mitigates that difference,” he said.